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They're not useful. They're a means of wealth extraction disguised under whatever load of bullshit someone wants you to believe. I'll even prove it to you. As
by cbozeman 6y ago
They're not useful.
They're a means of wealth extraction disguised under whatever load of bullshit someone wants you to believe.
I'll even prove it to you. Ask someone with skin in the Wall Street game to explain this stuff to you, not mathematically, but in layperson's terms, so simple that a young child could understand it. They either won't be able to do it, or they won't do it. You'll get one of two answers, "It's really complex." or "It can't be simplified."
When you hear this kind of shit, you're can safely deduce one of two things:
1. The person in question doesn't have a deep understanding of the phenomenon or principle they're trying to explain.
2. The person in question isn't interested in explaining it because it directly affects them.
Ask a Ph.D.-holding, teaching nuclear physicist to explain how a star works. They'll be able to break it down for a 5 year old, a 15 year old, and a 24 year old graduate student, at various levels of complexity.
Ask a Ph.D-holding investment banker or hedge fund manager how all this works. They don't want you to know, because it isn't creating value. Not the kind of value an Amazon or a Tesla creates. It creates value for them and for the large investors they represent. Not for you the layperson.
- dataminer 6y agoAren't options like insurance? insurance can be explained rather easily. People buy insurance in their home, to protect their investment in an unlikely event that it gets destroyed. Similarly people can buy insurance to protect their investments in financial instruments.
- corey_moncure 6y agoTell your 5 year old you're going to give him 10 cookies, but he has a choice. Either he can have the 10 cookies right now, or he can pick up his room, and then he has the option of getting 10 cookies from you any time of the day or night during the next month, whenever he wants, no questions asked, no matter how busy daddy is. Or he can sell the option to any one of his friends or family, to guarantee they get 10 cookies in exchange for those pokemon cards he's had his eye on. That's an options contract.
- cbozeman 6y agoLOL, now take your analogy all the way. "If you don't clean your room in one week, Daddy is going to take away all your cookies, plus you'll owe Daddy 10 cookies."
- lainga 6y ago> I'll even prove it to you. OK, I'm listening, what's the proof?
- smabie 6y agoI work as a quant and I'll explain it to you. Email me